Counterparties: Less is more green

By Ben Walsh
February 1, 2013

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America is producing less of something, and for once, that’s good news: US carbon emissions are at their lowest level since 1994.

A decrease in emissions is definitely welcome, given the undeniable reality of global warming. And America did a bit more than just cut emissions. As a report from Bloomberg’s New Energy Finance details, the US invested $44 billion in renewables in 2012. That’s an 11% decline from the year before, but there’s still more money going into renewable energy than into any other energy source. Overall, US clean energy capacity is largely stagnant, while energy use has declined 6.4% since 2007.

America cut its carbon output without any help from federal legislation, and despite a largely symbolic energy secretary. Economics is taking the place of legislation: energy production from natural gas, wind, and solar is getting cheaper, and saving energy is easier than ever. New Energy Finance notes that gas consumption has dropped 5.7% since 2007, and buildings use 40% less energy per square foot than they did in 1980. US manufacturing is doing well (take a look at the latest ISM and GM sales numbers), so you can’t simply chalk up America’s carbon reduction to structural changes in the economy.

America is also burning less coal, which is terrific. Coal isn’t just carbon intensive: mining it destroys mountains, burning it is terrible for human health, and the ash is converted into a particularly toxic slurry.

A more mixed development is America’s increasing reliance on natural gas. That means lower emissions  compared to coal or oil, but fracking has plenty of environmental problems that we know about, and likely still more to be uncovered.

The bad news, as ever for the environment, is China, which remains an economy powered by coal. As China’s skies show, throwing large amounts of money towards renewable energy can’t offset an addiction to coal. China might not be able to get its act together, but as Cass Sunstein smartly pointed out, that’s all the more reason for the US to do so. — Ben Walsh

On to today’s links:

JPMorgan’s London Whale trader tried to warn his bosses about his “scary” trades – WSJ

Former mayor Ed Koch dies, he is “survived by New York City itself” – NYT
Koch on the suburbs: “It’s sterile. It’s nothing. It’s wasting your life.” – Business Insider

Primary Sources
US adds 157K jobs in January — as revisions reveal 400k+ jobs we didn’t know existed – BLS

Popular Myths
Debunking the myth of the “hidden prosperity of the poor” – Tom Edsall

Amazon, Apple and the simple genius of a low margin business – Eugene Wei

Deutsche Bank will cap (immediate) bonuses at $400,000 – Bloomberg
Deutsche’s strange, lonely fight with the Fed over bank capital – Peter Eavis

Quote of the Week
“Facebook is a large, inefficient engine for transforming electricity and programmers into a down-market place to sell low-value advertising” – Christopher Mims

Financial Arcana
Relax, banks’ risk measurements are rarely off by much more than a factor of 10 – Matt Levine

We’re maybe, possibly entering an era of new American progressiveness – Jeff Sachs

Obama’s Jobs Council disbanded, after possibly accomplishing some stuff – WSJ

Consumer Electronics Association cuts ties with CNET – Brian Stelter

Herbalife’s 10-K actually doesn’t say that it’s a pyramid scheme – Grumpy Old Accountants
The only thing markets have to fear is lack of fear itself – Bloomberg

Since December 2012, Goldman Sachs has been 100% less Fab – WSJ


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There are strong arguments for global warming to which you could link. You linked to a horrible, easily deniable argument for global warming.

Posted by realist50 | Report as abusive

BNEF says gas consumption in the U.S. is down 5.7% since 2007? That’s surely wrong. According to the EIA, natural gas consumption from January through November of 2012 totaled just under 23.0 Tcf. If you add November’s total again to account for December (December was higher since the national average temperature was lower; gas is heavily used for space heating), then you will see 2012 gas use rise to over 25.1 Tcf, with the actual total probably something more like 25.5 Tcf. In 2007, the U.S. consumed 23.1 Tcf. The data is all here, in Table 2:

Posted by MSWalk | Report as abusive

Oh, and coal consumption was lower in 2012 primarily because of one thing: we had no winter in 2011 – ’12. That caused some 800 Bcf of lost demand for natural gas as a heating fuel. Because gas production is uneconomic to turn off unless prices go really, really low (as in, well below $2), that “lost” heating fuel consumption had to be made up for somewhere else; that somewhere else was the electric generation sector (about the only place with any significant short-run price elasticity for gas consumption). Because of that, utilities and merchant generators ran gas plants instead of coal plants to generate electricity. If heating demand rises, gas consumption in the power sector will necessarily fall as the gas price rises; this has already manifest this winter, and will continue to do so if gas production falls. Drilling for new gas has declined precipitously since doing so is uneconomic (at least relative to other opportunities for capital deployment) at prices below $4/mmbtu.

Posted by MSWalk | Report as abusive

Friday’s WSJ had an interesting article about the negative impacts of lingering bad debts in Europe – 127887323783704578249673291622116.html?K EYWORDS=european+debt

Interesting to read just how onerous individual bankruptcy laws are in Europe compared to the U.S., and all the problems that they create in recovering from a debt-fueled boom and bust.

Posted by realist50 | Report as abusive

@MSWalk – I assume that the reference to a 5.7% drop in gas consumption since 2007 is gasoline consumption, not natural gas consumption.

Posted by realist50 | Report as abusive